Australian regulator to probe mortgage rate 'profiteering' by big banks

SYDNEY (Reuters) - Australia’s corporate regulator said on Thursday it will investigate whether the country’s big banks are using a regulatory push to curb a potential housing bubble as an excuse to profiteer through increased mortgage rates.

Investigators would focus on whether the banks’ for recent out-of-cycle interest rate rises have been excessive and whether their public justifications had been “inaccurate and perhaps false and misleading”, Australian Securities and Investment Commission (ASIC) Deputy Chairman Peter Kell told a parliamentary committee.

“It is an issue we are concerned about ... we will have to look at any particular statement carefully,” Kell said.

Regulators have pushed banks to tighten mortgage lending standards on worries a debt-fuelled bubble and bust in the property market could destabilize the financial system and hurt the broader economy.

But such moves were not designed to increase bank profits and lenders should not use them to justify over-pricing mortgage products, said lawmaker David Coleman, a Liberal Party member of the economics committee.

Executives at Commonwealth Bank of Australia (CBA.AX), Westpac Banking Corp (WBC.AX) and National Australia Bank (NAB.AX) had all issued statements linking the rate rises to the new rules, he said.

In particular, he said CBA’s rate increases should be scrutinized after the bank justified a 30-basis points increase on home loans in June as necessary “to meet our regulatory requirements”.

Representatives from CBA, Westpac and NAB were not immediately available to comment.

Macquarie analysts estimate CBA’s repricing has contributed about A$500 million to its profits. It posted its eighth consecutive record cash profit on Aug. 9, days after being accused of massive breaches of money laundering and terror financing rules.

Australia’s four major lenders control 80 percent of Australia’s lending market and have posted record profits for years.

But they have been mired in controversy and scandal for years, including misleading financial advice, insurance fraud and interest-rate rigging.

Out-of-cycle mortgage rate changes that have generated the biggest public and political outcry, as home-owners struggle to meet high repayments with modest wages growth.